The federal Court of Appeals for the Fifth Circuit, whose jurisdiction covers the states of Texas, Louisiana, and Mississippi, issued an opinion on May 7, 2013 in ACS Recovery Services, Inc. v. Griffin, holding that the plan administrator and plan sponsor (collectively, “ACS”) of the group medical plan that covered employee Larry Griffin (the “Plan”) could recover from a special needs trust nearly $50,000 of medical expenses paid by the Plan on Mr. Griffin’s behalf when he was injured in an automobile accident. Mr. Griffin and his ex-wife filed suit against the company responsible for the other vehicle (the “Third Party”) and obtained a settlement with a present value of just over $294,000. The Plan’s terms provided that it would have “a first lien upon any recovery, whether by settlement, judgment, arbitration, or mediation” obtained in a third-party action, and further provided that a participant must not take any action… Continue Reading
Court Finds Breach of Fiduciary Duty Against Broker for Failure to Explain Interaction of Stop-Loss and Self-Funded Health Plan Coverage
In Express Oil Change, LLC v. ANB Insurance Services, Inc., the sponsor of an employee health plan (the “Employer”) decided to convert its funding for the plan from a fully-insured to a self-funded basis. In preparation for the conversion, the Employer sought the advice and expertise of ANB Insurance Services, Inc. (the “Broker”) with implementation of the self-funded plan (the “Plan”) and procurement of the associated stop-loss insurance coverage. Apart from providing benefit consulting services to the Employer, the Broker had a long-standing and close relationship with the Employer as its agent for various other types of insurance coverage. The terms of the newly self-funded Plan provided for a $1 million lifetime maximum per participant on out-of-network benefits, but no such limit on in-network benefits. The Employer erroneously thought that the lifetime maximum applied to both in-network and out-of-network benefits and purchased a stop-loss policy with a deductible of $75,000… Continue Reading
The U.S. Department of Labor (the “DOL”) recently released Technical Release 2013-2, which contains temporary guidance regarding notices required by the Patient Protection and Affordable Care Act (“PPACA”) that employers must provide to their employees concerning coverage options available in the new health insurance marketplaces, or “exchanges.” Generally, PPACA requires that any employer subject to the Fair Labor Standards Act (“FLSA”) must provide its employees with written notice of the existence of an exchange, contact information for the exchange, and the services provided by an exchange; that the employee may be eligible for a premium tax credit if the employee purchases coverage through an exchange; and that the employee may lose any employer contribution to a health benefit plan, if offered by that employer, which contribution may have been excludible from the employee’s taxable income. Effective October 1, 2013, employers must provide such notices to all current employees and to… Continue Reading
The EU Court of Justice held that Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 (“Directive 2008/94”) applies to pension benefits under a supplementary pension scheme, regardless of the cause of the employer’s insolvency, and without taking into account state pension benefits. Directive 2008/94 provides that member states must protect the pension interests of retirees when an employer becomes insolvent. In prior cases, the EU Court of Justice held that, while a member state need not guarantee 100 percent of the pension benefit, a guarantee of less than 50 percent is insufficient. In the case before the court, a crystal manufacturer (the “Employer”) in Waterford, Ireland, entered into bankruptcy. The Employer’s defined benefit pension scheme was severely underfunded and could cover only between 18 percent and 28 percent of the liabilities. A group of employees sued the Irish Minister for Social and Family Affairs… Continue Reading
IRS Proposed Regulations Regarding Minimum Value of Employer Plans and the Health Insurance Premium Tax Credit
On May 3, 2013, the IRS issued proposed regulations (the “Regulations”) regarding the health insurance premium tax credit (“Credit”) enacted under PPACA and the determination of the minimum value of health coverage (“MV”) provided by an eligible employer-sponsored plan (“Plan”). Under PPACA, individuals generally cannot receive a Credit if they are eligible for coverage under a Plan that is “affordable” and provides MV. Certain large employers may be subject to a penalty under PPACA’s “play or pay rule” if a full-time employee receives a Credit. A Plan fails to provide MV if the Plan’s percentage share of the total allowed costs of benefits provided is less than 60 percent. The Regulations address the treatment of various benefit arrangements, including integrated health reimbursement arrangements and nondiscriminatory wellness programs, in the determination of a Plan’s percentage cost share for MV purposes and the affordability of the Plan’s coverage. Notably, with respect to… Continue Reading
On May 2, 2013, the Internal Revenue Service (the “IRS”) issued Revenue Procedure 2013-25, which set the annual limit on deductions permitted in 2014 for health savings accounts at $3,300 for individuals with self-only coverage under a high-deductible health plan and at $6,550 for individuals with family coverage under a high-deductible health plan. A high-deductible health plan for calendar year 2014 is a plan that has an annual deductible of at least $1,250 for self-only coverage or $2,500 for family coverage. Revenue Procedure 2013-25 can be found here.
IRS Issues Voluntary Correction Program Submission Kit for Plan Sponsors Who Missed the Deadline to Adopt a Pre-Approved Defined Benefit Plan
Employers that maintained pre-approved defined benefit retirement plans generally were required to adopt a new plan document, on or before April 30, 2012, that incorporated changes required by EGTRRA. Employers that failed to meet this deadline may correct this failure by adopting a restated EGTRRA plan document and filing a submission for a Voluntary Correction Program (“VCP”) compliance statement with the IRS in accordance with the submission kit, which guides plan sponsors through the steps in filing a submission for a VCP compliance statement for this adoption failure. If there are other plan failures, a submission using the kit’s requirements will not correct the other failures. A copy of the kit can be found here.
New FAQs Address Annual Limit Waivers, Provider Nondiscrimination, and Transparency Reporting under PPACA
The Departments of Labor, Health and Human Services, and Treasury (collectively, the “Departments”) recently released frequently asked questions (“FAQs”) addressing the implementation of the annual limit waivers, provider nondiscrimination, and transparency reporting requirements under the Patient Protection and Affordable Care Act (“PPACA”). In the FAQs, the Departments first clarified that a change to a health plan or insurance policy year will not affect the expiration date of an annual limit waiver. For instance, if a waiver was granted for an April 1, 2013 plan or policy year, the waiver will expire on March 31, 2014, regardless of whether the plan or issuer later amends its plan or policy year. Next, the Departments announced that no regulations are forthcoming to address PPACA’s provisions related to nondiscrimination against providers or coverage for individuals participating in approved clinical trials because the Departments considered such provisions to be self-implementing. Accordingly, non-grandfathered group health plans… Continue Reading
In the words of CBS News, “another day, another high-profile password hack.” LivingSocial posted a security notice on its website on April 27, 2013 alerting users to a cyberattack of its servers. For those readers who have not used the company’s services, LivingSocial is a discount site similar to Groupon that claims more than 70 million members worldwide. As of November 2012, LivingSocial advertised that it had sold over 123 million vouchers. As first reported by tech blog AllThingsD, customer data for more than 50 million users may have been accessed. Some of this data may include users’ names, email addresses, encrypted passwords and the dates of birth. Avid readers of this blog may recall that we discussed the rise in litigation following high-profile hacking in January. That post was recently expanded into a full-length article in Managing IP. In quick summary, plaintiffs’ counsel are finding new and novel ways… Continue Reading
In Notice 2013-17, the IRS extended the deadline to amend an employee stock ownership plan (“ESOP”) to eliminate certain statutory in-service distributions as a diversification option that applies to an ESOP that does not hold publicly traded employer securities when the employer’s securities become publicly traded and to an ESOP that becomes subject to the diversification requirements that apply to ESOPs holding publicly traded employer securities. This guidance permits the change in the diversification rules and distribution rights without causing the ESOP to be in violation of the anti-cutback provisions of Section 411(d)(6) of the Internal Revenue Code. The prior deadline to so amend an ESOP was the deadline to amend under the Pension Protection Act (“PPA”). Pursuant to Notice 2013-17, the new deadline is the later of the PPA deadline or the last day of the first plan year starting on or after January 1, 2013. A copy of… Continue Reading